Those 18 minutes will haunt me, says the executive, who wasnt authorized to speak publicly. read more. That means it would have suffered much more than $US2 billion ($2.7 billion) of daily losses at the most extreme point of nickels surge. Its been under growing pressure to meet the payments in recent days, the people said. One of Tsingshans brokers, CCBI Global Markets, also failed to pay hundreds of millions of dollars in margin calls on its nickel positions on March 7. Help using this website - Accessibility statement. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Tsingshan's difficulties paying its margin calls have put its . In an earlier interview with Chinese news outlet Yicai, Xiang blamed "foreigners making some moves" for nickel's price spike. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. The LME nickel short squeeze was created by Chinese stainless-steel producer Tsingshan as it built up massive short positions for the metal, and its margin calls spike in-line with the surge in nickel prices in March. In a squeeze, rising prices put traders betting on a drop in an ever-tougher financial position, forcing them or brokers and banks doing business on their behalf to buy the asset, a trade known as short covering that can drive prices even higher. Just over a year after the historic short squeeze involving video-game retailer GameStop sent shockwaves around the financial world, a similar episode broke out in early March, this time on the London Metal Exchanges (LME) nickel market. For the fourth quarter, the company expects to generate "high single-digit. There are also traders making plans to abandon the LME nickel contract, a move that would reduce market liquidity, making it harder for everyone from miners to car companies to manage their exposure to prices and access financing. A stressful week in markets got even worse for some metals traders when the main exchange's software misfired by generating erroneous margin calls, adding to the chaos at a time when brokers . Mr Xiang began building the short position in part because he wanted to hedge rising output, but also because he believed the rally in nickel prices would fade this year. Indeed, Russia is the worlds third-biggest nickel producer after Indonesia and the Philippines. Some hedge funds were buying nickel contracts in a bet on the electric vehicle boom. On Monday, one of Tsingshans brokers a unit of a state-owned Chinese bank failed to pay hundreds of millions of dollars in margin calls on its nickel positions. This weeks spike in prices has played out principally on the LME, and many traders expect the price to return to more normal levels once the margin call chaos has been resolved. The big fear was that Tsingshan would struggle to make margin calls with its bankers, potentially facing billions of dollars in losses. Copyright | NIC's operations and cash flow remained stable in 2022 despite Tsingshan's significant loss on its nickel short position in March 2022. Is the US Finally Warming to the Possibility of Creating a CBDC? While the exact scale of Mr Xiangs losses is unclear, Tsingshans short position on the London Metal Exchange is in the region of 100,000 tonnes of nickel, people familiar with the matter said. Xiang Guangda -- who controls the world's largest nickel producer, Tsingshan Holding Group Co., and is known as "Big Shot" in Chinese commodity circles -- has closed out part of his company's short position and is considering whether to exit the wager altogether, the people said. Weve received a lot of phone calls today, he said. To gauge the magnitude of the problem, an unnamed source familiar with the trades told the, Nickel trading did resume on March 16, but the exchanges electronic trading system malfunctioned on several occasions after resumption, while preset daily limits on price movements (5 percent on the 16, The LME has been asleep at the wheel, according to Andrew Mitchell, director of nickel research at consulting firm Wood Mackenzie, who spoke to the, But the LME has defended its actions, arguing that the decisions it took were made with full regard to regulatory due process and in the interests of the market as a whole, according to a spokesman for the exchange, who spoke to UK financial-news publication, Manuel A. Muoz European Central Bank (ECB), Miguel Moreno Tripp EGADE Business School | Crowe Global, Flix Villatoro Universidad Adolfo Ibez Business School, Kenneth D. Simonson Associated General Contractors of America (AGC), Dalia A. Kader Commercial International Bank (CIB), Davi Ferreira Veronese University of So Paulo, Maria Paula Bertran University of So Paulo, Thanos Andrikopoulos University of Hull, Tim Johnson JB Super Yachts | TJB Private Travel. The Chinese nickel tycoon whose big short position caused chaos reached a deal with his banks to avoid further margin calls, marking a key step toward restoring stability to the market after an unprecedented squeeze. Tsingshan Holdings was founded in 1988 by Xiang Guangda in Wenzhou. Xiang didnt believe the rally would last. Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Now, the traders watched with a mixture of horror and grim fascination as the price went vertical. The war in Ukraine surprised the market and led to a price surge, pushing Tsingshan's margin to billions as it rose in-line with nickel prices. Its also one of the most important raw materials needed inmaking batteriesfor electric vehicles. In theory, any price changes on the futures market should offset price changes in the value of the inventoriesas long as the traders canmeet their margin calls. On February 22, 2023, Yangjiang News, at the "New Track, Great Future--Qingshan S32001 Duplex Steel Channel Market Launch Conference" hosted by Qingyi Steel Challenges Remain, But There Are Opportunities to Be Interview with Mr. Olukayode Pitan, Chief Executive Officer Unemployment in South Africa: Urgent Attention Required, The US-Africa Leaders Summit: Fostering a Closer Relationship with the Continent, Agenda BC#: Innovation and Inclusion in the Brazilian Financial System, Why Fertiliser Prices Have Been So Volatile This Year. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. Remember, when prices move up, traders like Xiang who have sold futures contracts face margin calls; they must put up more cash to cover potential losses. See here for a complete list of exchanges and delays. Beijing is supportive of him, Xiang told contacts recently. Pada titik ini, posisi short Tsingshan dibekukan. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. The LME nickel short squeeze. The LME did not put it into default, instead giving it more time to pay. Bloomberg: Balance of Power focuses on the politics and policiesbeing shaped by the agenda of President Biden's administration. Jack Farchy, Alfred Cang and Mark Burton, Bloomberg News. This is a fee deposit with a counterparty (often the brokers or exchange) to cover some of the credit risk undertaken to take a short position. It said the banks agreed not to make margin calls or close out their positions against Tsingshan while the company is resolving its nickel margin and settlement requirements. Tsingshan has said it has secured facilities with its consortium banks and will exit its position in an orderly manner. . Contact us | As the market was picking up on the short squeeze of Tsingshan, the LME had decided to intervene. For the LME to cancel nickel trades between willing buyers and sellers is unforgiveable. How to Geta Free Flight to Hong Kong in 500,000 Airline Ticket Giveaway, Apple Suppliers Are Racing to Exit China, AirPods Maker Says, Stocks, Bonds Drop as Traders Weigh Data, Fedspeak: Markets Wrap, Microsoft Expands Game Pass as Regulators Fret Over Activision Deal, Cash Is Paying More Than Traditional Stock-Bond Portfolio. It had sold nickel forward on the markets, betting on the price going down, not up. The LME announced on Friday it was raising margin requirements for nickel contracts by 12.5% to $2,250 a tonne. An employee. If nickel prices stay lofty it could complicate the energy transition with electric vehicle batteries costing more to produce. You should never trade more than you can afford to lose. The exchange then retroactively wiped out $3.9 billion worth of transactions made before the suspension to demonstrate that nickel prices had stopped reflecting the underlying physical market. Tsingshans were even larger, numbering roughly US$3 billion, according to a Bloomberg calculation based on the companys total short positionwhich, even after Xiang had closed out a portion of the bet in previous weeks, was over 150,000 tons. Trimegah menilai bisa. Q. The company, sitting on $8 billion in trading losses, said Wednesday it had secured enough metal to settle all its loss-making positions, according to a state-run media outlet. Distribution and use of this material are governed by Short-covering trades made last week by the Chinese billionaire contributed to a swift, huge surge. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Then on March 7, nickels price began its parabolic ascent, surging from US$30,000 a ton to more than US$50,000. (Bloomberg) A unit of China Construction Bank Corp was given extra time by the London Metal Exchange to pay hundreds of millions of dollars in margin calls it missed on Monday amid an unprecedented rise in nickel prices, in this case According to people familiar with . read more. That might have taken down some of the LME 's member-brokers. The London nickel market has been closed since last Tuesday morning, when the exchange intervened after prices spiked as much as 250% in two days, and the standstill announced by Xiangs Tsingshan Group Holding Co. could provide the certainty needed to restart trading. Not surprisingly, investors have not been particularly satisfied with the LMEs actionsor lack thereofin allowing this situation to transpire. LONDON, March 14 (Reuters) - China's Tsingshan Holding Group has reached an agreement with banks under which they will not make margin calls on or close out the producer's nickel positions on the London Metal Exchange (LME), the company said on Monday, a move sources said should help calm the market. According to industry members association International Nickel Study Group (INSG), stainless steel production accounts for over two-third of nickel demand in 2020, while the use in batteries for EVs remained low at 6%. The Initial Margin was $20,000 per contract. JPMorgan Chase & Co (JPM.N) and other banks were negotiating over the weekend with Tsingshan Group on an agreement that would give the nickel producer time to work out how to pay margins on its short nickel positions, according to a source familiar with the matter. The LME was forced to suspend nickel trading for the first time since 1988 on March 8 and is trying to facilitate negotiations to net off long and short positions in order to reopen the market. LONDON (Reuters) -- China's Tsingshan Holding Group has reached an agreement with banks under which they will not make margin calls on or close out the producer's nickel positions on the London . How to Geta Free Flight to Hong Kong in 500,000 Airline Ticket Giveaway, Apple Suppliers Are Racing to Exit China, AirPods Maker Says, Stocks, Bonds Drop as Traders Weigh Data, Fedspeak: Markets Wrap, Microsoft Expands Game Pass as Regulators Fret Over Activision Deal, Cash Is Paying More Than Traditional Stock-Bond Portfolio. Capital Com is an execution-only service provider. The metal is found in all our homes as a key ingredient of stainless steel. China's Tsingshan Holding Group bought large amounts of nickel to reduce its short bets on the metal and its exposure to costly margin calls, turbocharging a record rally fuelled by the conflict . We expect the LME nickel price to remain volatile in the near term, as the global nickel market finds equilibrium following recent events, S&Ps Sappor added, warning that an elevated risk of another short squeeze hitting the LME nickel market in the near term continued, given the presence of both a dominant warrant-holding position on available LME stocks and Tsingshans short position. The prices that were being seen during that Asian session were becoming disconnected from, I believe, physical reality.. Executives at Tower Research Capital, one of Wall Streets oldest electronic market-makers, reined in its trading activity on the LME and put its membership in the exchange under review. Matthew Chamberlain, the LMEs chief executive officer, had stayed up to watch. Nickel short interest was created by Tsingshan. News Corp is a global, diversified media and information services company focused on creating and distributing authoritative and engaging content and other products and services. This created an unprecedented LME nickel short squeeze. CCBI Global Markets is another creditor, two separate sources said. One resolution to the situation may be for Glencore and Xiang to strike a deal to use Glencores long positions to cancel out some of Xiangs short. While Russias nickel exports havent been targeted by sanctions, U.S. and European buyers have nonetheless sought alternatives to Russian sources. Tsingshan is also a nickel miner and operates nickel pig iron mines and production facilities. The price spike left Tsingshan exposed to $8 billion USD of trading losses whilst struggling to meet their margin calls. Nickel short interest was created by Tsingshan. Pleased to report an extremely strong year for the Nickel Industries and the. Tsingshan's 2022 nickel equivalent output is . Given nickel matte prices of roughly $15,421/t May 18, we calculate a profit margin of $5,571/t for Tsingshan's nickel in matte. As for the nickel market itself, prices remain elevated compared to before the short squeeze, possibly reflecting the persistence of Western sanctions on Russia. The most notable holder of short positions is Tsingshan Holdings - one of the world's largest nickel and stainless steel producers - which is believed to own positions on about 100,000 tons of nickel with paper losses totaling up to $8 billion before the London Metal Exchange halted trading. .css-16c7pto-SnippetSignInLink{-webkit-text-decoration:underline;text-decoration:underline;cursor:pointer;}Sign In, Copyright 2023 Dow Jones & Company, Inc. All Rights Reserved, Final Early Bird Pricing! The current events are unprecedented, LME said in a notice. Several large brokers got margin calls of close to US$1 billion each over the course of the day. For Xiangs big short position, that was painful. It's been under growing pressure to meet the payments in recent days, the. At $2,250 a tonne, the capital required on 300,000 tonnes of nickel would be $675 million, according to Reuters calculations. It should be mentioned that nickel had already rallied to $25,000 in January before easing off by the end of the month. The price move on March 8 created a systemic risk to the market, the LME said two days later. The first source said that the banks could potentially earn money on a bridge loan secured by future nickel production if Tsingshan paid them back over time as it produced nickel. The difference between trading assets and CFDs. Indeed, reports suggest that a number of investors are now preparing lawsuits, while the LMEs regulator, the Financial Conduct Authority (FCA), is expected to investigate the incident. All quotes delayed a minimum of 15 minutes. For the LME, the future isunclear. FY18 RESULTS, FY19 GUIDANCE AND CORPORATE PRESENTATION 22 AUGUST 2018 AGENDA Results Guidance Corporate Operations Growth Exploration Nickel Market DISCLAIMER AND FORWARD As the price rose through the London day after offices in Asia had closed, Tsingshan started struggling to pay, the people say. Comparable-store sales rose 19.3% in fiscal 2020 and grew another 14.4% year over year in the first nine months of 2021. Based on the close on Friday night at $29,130, the LME were raising initial margins to a prudent 7.72% of the contract value. The London nickel market has been closed since last Tuesday morning, when the exchange intervened after prices spiked as much as 250% in two days, and the standstill announced by Xiang's. Founded back in 1877 and now owned by Hong Kong Exchanges & Clearing (HKEX), the LME performs a critical role in determining benchmark prices for the global metals industry and provides a liquid market venue for financial institutions to make money. Advertise | Careers | Editorial Guidelines | Still, contracts on the LME are backed by physical metal in a network of warehouses around the world, providing a direct link with the real-world metals industry. Nickel prices have since fallen and the three-month nickel last settled at $23,371/tonne on 3 November. Distribution and use of this material are governed by Exchanges sometimes cancel trades when technology glitches or fat fingers cause one-off mistakes. That put Tsingshans banks and brokers, which include JPMorgan Chase, BNP Paribas, and Standard Chartered,in a bind. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. People familiar with the discussions said the exchange would ideally prefer to wait until Xiang has reached a resolution with his banks and brokers. Traders must deposit cash,. By now, Tsingshan wasnt the only nickel company that was strugglingjust the biggest. Now, people familiar with the matter say, the exchange is likely to introduce such measures as position limits and greater transparency. Tsingshan has been struggling to pay margin calls to its brokers, according to people familiar with the situation. Some have also warned that much of the chaos in the nickel market may not be over yet. Already at an all-time high by 5:42 a.m., it lurched higher in stomach-churning leaps, soaring US$30,000 in a matter of minutes. By early this year, it had taken ownership of more than half of the available nickel in LME warehouses. Many producers, traders, and users of nickel with short positions on the LME were facing margin calls many times larger than they were prepared for. Are you considering whether or not to trade nickel or want to learn more about the market? LME CEO Matthew Chamberlain says suspending nickel trading and canceling the trades on the London Metal Exchange was the right decision for the sake of market stability. The super spike was driven by holders of short positions, including Tsingshan and its brokers, rushing to close them out. Perdagangan nikel di LME dihentikan sementara sejak Selasa lalu. As of the evening of March 13, the LME had yet to announce a date for nickel trading to resume. Perhaps whats most surprising is that this nickel squeeze happened within a market that had, for the last few years, been comparatively sedate, with rangebound trading rarely breaking above the $20,000/metric tonne (mt) mark on the upside before 2022. Some aggrieved traders are already preparing to take legal action against the exchange. According to reports, Tsingshan Group plans to produce 850,000 tons of nickel in 2022, an increase of 40% compared with the production of nearly 600,000 tons in 2021. Bloomberg: Balance of Power focuses on the politics and policies being shaped by the agenda of President Biden's administration. Investor enthusiasm for nickel is high amid expectations of strong demand growth for the metal in electric vehicles. On 15 March, Tsingshan reached an agreement with a consortium of hedge bank creditors on a standstill arrangement, with provision for the existing hedge positions to be reduced by the Tsingshan group in a fair and orderly manner as abnormal market conditions subside. Creditors and banks who acted for Tsingshan were demanding margin settlements and the closing of all positions. The extra charge kicks in at close of business on Tuesday. Anyone using the LME needs to understand that. And it was already heading higher once more in February prior to the outbreak of war in Eastern Europe, partly on renewed interest in the metal as the global economy continued its recovery from the COVID-19 crisis as well as buoyant demand for electric vehicle batteries, of which nickel is a principal component. But now, serious questions are being raised over the LMEs lack of foresight in not anticipating this incident, especially given the sheer size of Tsingshans short position, which it began to compile last year. The Chinese government may also play a role. Xiang wanted to increase Tsingshans production dramatically by producing so-callednickel matte. Why is nickel going up so drastically in a short period of time? Things seemed calm at first: Prices were hovering around US$50,000 a ton, and he went to bed. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. Nickel prices doubled on Tuesday and briefly rose above a record $100,000 a tonne as banks and brokers rushed to close part of a huge position amassed by Xiang Guangda, the billionaire founder of. read more. A week earlier, nickel was trading around $25,000 and the price of the metal has more than quadrupled in a matter of days. Cliff Asness, founder of AQR Capital Management,accused the LME, which was for more than a century owned by its members but in 2012 was sold to Hong Kong Exchanges & Clearing, of stealing money from market participants trading in good faith and giving it to Chinese nickel producers and their banks. LMEs Chamberlain defended canceling the trades. [2] It moved into the Indonesian nickel industry in 2009. HONG KONGChinese nickel titan Tsingshan Holding Group faces billions of dollars in trading losses, people familiar with the company said, after .css-1h1us5y-StyledLink{color:var(--interactive-text-color);-webkit-text-decoration:underline;text-decoration:underline;}.css-1h1us5y-StyledLink:hover{-webkit-text-decoration:none;text-decoration:none;}Russias war in Ukraine set off an unprecedented rise in the price of a key metal used in stainless steel and electric-vehicle batteries. The three-month LME nickel prices hit an intra-day high at $101,365 a metric tonne on 8 March 2022. . On March 8,2022 price of Nickel went suddenly up $100 per kilogram . The giant commodity trader Glencore Plc also had a position on the LME that would benefit from rising prices. Exchanges. We expect the EBITDA margin to be around . One of the world's biggest nickel and stainless steel producers, Tsingshan started building a short position -- a wager that prices will fall -- in the nickel market last year. During the standstill agreement, the company and banks will discuss a standby secured liquidity facility, Tsingshan said. Known as "Big Shot" in China for his imposing presence in the metal industry, Xiang Guangda, the founder of the world's biggest nickel and stainless-steel firm, Tsingshan, had amassed a short position of more than 150,000 tonnes of nickel, which was about five times the volume of the metal held by the LME and equivalent to approximately Allowing this situation to transpire are already preparing to take the high of... 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